Closing Bell - Closing Bell Overtime: Amazon and Apple report results 8/3/23

Episode Date: August 3, 2023

The major averages finished the day slightly lower after Wednesday’s sell-off, but the real action started after the bell – as Amazon and Apple reported earnings results. Both companies topping estimates on the top and bottom lines – with Amazon also giving optimistic guidance, sending shares sharply higher. Shareholders George Seay and Eric Jackson weigh in on Amazon’s results, while analysts Angelo Zino and Scott Kessler break down Apple’s quarter. Plus results from Coinbase, Airbnb, Block, and what to watch from Friday’s jobs report.

Well, stocks finishing the day lower again today after long-dated treasury yields hitting their highest levels since November. It is the make-or-break moment for mega-cap tech, though. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Fort. Apple and Amazon are the headliners of a major afternoon of earnings reports. Amazon's results are due out in just seconds. We will get Apple at the bottom of the hour. Not just those two, though. We're also awaiting numbers from Block, Coinbase, Airbnb, Booking Holdings, and maybe a couple more. All right, let's get straight to our panel as we do await those numbers. Joining us now, Annandale Capital founder George C., who owns shares of

Apple and Amazon, and EMJ Capital founder Eric Jackson, who also owns those names, along with Coinbase and Block. Good afternoon to you both. George, I'll start with you. In terms of trading today, the focus was really on this move higher that we've seen in yields that has put some of these tech names and growth names under pressure. Your expectations and how it sets us up for Amazon and Apple today. Okay, Amazon is out. We're going through those numbers and we're going to bring those results here any moment. In the meantime, George, want to get your thoughts on what you're looking for. Yeah. Hi, Morgan and John. Unless there's a huge miss by both firms, I think that

they're basically just marking time right now. I think this is just a holding pattern. I think the interest rate move we got on the fish downgrade is really giving people excuse to take some profits after such an unbelievable year. If you're an investor, you don't do a whole lot with these two stocks. We've written some calls out of the money on Microsoft, but we've yet to do that yet on Apple because we really don't think the valuation justifies that yet. So I think it's a lot of stand, pat and hold still unless they really miss badly either company. OK, Eric, how do you see it, especially given the fact that when it comes to Apple or Amazon, you're talking about two names that are each up about 50 percent on the year so far. Actually, we're going to hold that thought. Deirdre Bosa has the results for

us on Amazon. Heidi. Hey, Morgan, that stop is popping up nearly more than six percent now in extended trade because it is a beat on the top and the bottom line. Let me bring in those numbers. Earnings per share of 65 cents versus 35 cents expected. So a big beat, more profitability from the company there. Revenues coming in at $134.4 billion versus $131.5 billion. So beat there as well. And let me tell you as well, net sales for the current quarter are expected to be between $138 and $143 billion. We'll get you some comparisons for that, and we'll also dig into some of the other numbers, especially AWS, which is so critical. But initial reaction from investors is good, as it's a beat on the top and bottom line. Back to you.

All right. Dee, thanks. George C., it looks like they're saying AWS segment sales up 12 percent year over year to twenty two point one billion dollars. Is that the most important number here or is there something else? Margins, perhaps you're looking at also, you know, it looks like the operating income that they're guiding to between five point five and eight point billion. Should reassure some people who might have wondered if we're going through an investment cycle here? Yeah, if you look at the way Amazon and Apple and Microsoft and all the big heavyweights manage the street, it's really

kind of like a symphony. They manage it so well and manage expectations to where when they produce, unless something really goes wrong for them, they outperform and the stock gets a nice pop. The thing that's interesting to me about the initial reaction, which is so strong because clearly everybody likes the numbers, is what's the guidance going to look like? I mean, Qualcomm was pretty stagnant until they gave guidance on their call yesterday, and then it got absolutely bombed after that. So I think people are a little premature to celebrate, but at the same time, it's good news so far. All right. Eric, I want to get your reaction on this, too, especially North America segment sales looks like increased 11

percent international segment, 10 percent year on year, and that AWS segment sales up 12 percent year on year to twenty two point one billion dollars. Yeah, I'll celebrate, Morgan. I own this stock. I'm happy when I see an eight percent pop. Come on. I think this is a story where expectations for Amazon were probably the lowest of any of the Magnificent Seven coming into this print. And AWS definitely was important. I think people felt that going from 30% growth to 20% to expectations were 10% for this time around. I think a lot of people thought this is just going to go through the floor eventually. I think what this print has showed is that they're you know, we're probably they've troughed already in terms of AWS growth. I think we have some some back half of the year growth to look forward to. And I think the margin story is probably what's getting more interest.

Once we see if we if we see signs that retail margins ticked up, you know, as well as AWS and the growth prospects there. I mean, that's going to make people look at the stock again. George, it's interesting. It looks like the street was expecting around, you know, one hundred thirty eight billion for Q3 revenue. And that's the low end of the guide here of one hundred thirty eight to one hundred forty three. Has the street been sleeping on Amazon? Maybe still, you know, when it comes to AI, there's been a lot of talk about Microsoft having the lead, even though Amazon's talking about bedrock and, you know, their plans there for AI and models. People still seem to be talking more about Microsoft and even Google. Do they have a

chance here with these results to shift the narrative? That's what they're trying to do. And I think they're doing it very effectively. I'd go back to my orchestration comment that these big companies know how to manage the street and expectations just brilliantly. It's really fun to watch them do it so well. And I've been celebrating on Amazon all year. I was buying the stock in October and November of last year. I just don't want to celebrate too long we've already had about a 55 move this year which has been remarkable for a six to seven month period and going forward it's gonna get harder uh eric want to get your thoughts on amazon when it comes to ai because it says here uh in the release you have some commentary about that uh from andy jassy basically talking about um the fact that the fact that they are in a leadership position in the cloud

with a slew of generative AI releases, runs through some of those examples, and says that they're also, in addition to AI, seeing strong demand for advertising services, and goes on through. But the AI piece of it, specifically, do they need to say more about that? And I'm thinking about John's interview with Jassy just a couple of weeks ago here. Well, yeah, there's an opportunity there for sure that they, along with Apple, really have shied away from talking about AI the most, I would say. And therefore, I think the fact that they're coming out on the release and then we'll

see what comes on the call, they can speak to to that more i think it can get people excited i i agree with john i think that uh you you would think if you were just going by the news headlines of this year that that microsoft was in the lead in the club and that's obviously amazon is still the king here i think if they can speak to the ai part more that that will you know help to change the narrative that microsoft sort of took took the baton from them. Andy tried to tell us here on Overtime last month, but maybe not everybody was listening. Mike Santoli, I want to bring you into the conversation on Amazon. What's catching your eye in these results?

Well, I do think it's across-the-board relief, definitely, in terms of the revenue guide. Also, you mentioned, John, the operating income guide, which is encouraging in its in its general range. But it always fascinates me. I've been talking about this for years, that it's a three billion dollar range for operating income in the quarter. That's a third over. So it tells you how Amazon gets stuff to the bottom line, which is with a wide variability in how it's going to play out. And that's just a function of that. You know, it's not that they're managing for the to the penny. So all that, I think, to the good. I think that the street sentiment, I don't know if they're sleeping on Amazon, but it's a very weakly held bullishness on the sell side. You still have like

90 percent buy ratings, but they've kind of been beaten down by the underperformance over two years. And the story just hasn't quite come through. The sense of urgency hasn't. Maybe that's changing right now. We'll see how the call plays. All right, Mike. Thank you. Want to get out to Deirdre Bosa now with Airbnb results.

Dee? Shares are down nearly 5 percent in extended trade, even though we're seeing a beat on the top and the bottom line. I'll give you the numbers here. Earnings per share of 98 cents, which is better than the 78 cents that was expected. Revenue small beat as well here, $2.5 billion versus 2.4 expected. Maybe a little bit of weakness that investors are taking issue with underneath the surface here. Nights and experiences booked was a miss. However, gross value booked was actually better than expected. Guidance was better than expected as well. However, ADR's average daily rates,

if you might remember over the pandemic, especially over the last few years, this has been increasing. It is now moderating. They expect that to continue to do so in the future. So again, guys, a bit of a mixed quarter. And remember, this company is valued at the higher end for gig economy companies. So shares are down more than 5 percent now.

Yeah. George, want to get your reaction to that, especially since we have seen or there has been this expectation in the market that you're going to see some of that demand that Airbnb has benefited from in the pandemic coming out the pandemic, shift more to the hotel operators. And you could argue that to a certain extent that has already played out this earnings season. Yeah. And it's I think it's a process. I don't think it's just an event. And I think, again, this is this is where I have to tip my hat at the mega cap managements for Amazon and Microsoft and Apple and so forth and so on. They manage the street so well. And it's harder for these smaller companies with more volatility when they don't have quite as good a story. And the expectations are are so high for them to do anything but disappoint. You're seeing that after hours with Airbnb.

OK, we're going to stick with the travel theme here for a moment because booking earnings are out. And Seema Modi has those numbers. Hi, Seema. And Morgan, it's a big beat for booking holdings. Thirty seven dollars and sixty two cents adjusted well above Wall Street consensus. Revenue of five point four billion, also higher than the five point one seven billion estimate. Gross bookings, as we know, key here at thirty nine point seven billion. That's up 15 percent year over year, a stronger growth rate than we saw from its peer Expedia earlier today and above analyst expectations. So that's why you are seeing booking up about 4 percent in extended trade.

But Morgan, what this really tells me is that booking holdings, given that it makes over 60 percent of its revenue outside the U.S., it's really benefiting from the uptick that we are seeing in cross-border travel. More Americans headed to Europe. And now as Asia reopens, one stock that, of course, is benefiting as well. And that's being playing out in some of the numbers here that we see for guidance as well. Conference call starts at 430. We'll get you more details as they come in. Sounds good. Booking up 4 percent. Airbnb down more than 4 percent right now. Coinbase earnings are out. Kate Rooney has those numbers. Hi, Kate. Hey, Morgan. Coinbase was a beat in the second quarter. Smaller than expected loss here on EPS. It was 42 cents. Street was expecting 77 cents there. Better than expected. Coinbase revenues also beat at $708 million. Recurring expenses were down 50 percent or so

year over year. That included a 30 percent drop in headcount. So a little bit of belt tightening here. Quote in the release from Brian Armstrong, the CEO, he said it was a strong quarter executed well in a challenging environment. They talked about cost cutting, operating efficiency and some of the regulatory clarity that they're looking to parse through here. Also have assets on the platform. That was $12 billion subscription and services revenue, $335 dollars as well and uh that looks like total revenue as well 708 million dollars shares here popping after hours more than six percent higher now back to you guys okay uh kate thanks eric given what we saw from paypal from robin hood um how do we how are you digesting these coinbase results and does it at all?

Is it going to relate to what we see from Block in just a few moments, what we're waiting to see from them? How are these fintech names shaking out? Well, I think Coinbase is sort of off on its own, separate from PayPal and Block. Maybe Robinhood, you know, they have some exposure to crypto. I think Coinbase is obviously heavily shorted name. That's part of the reason, I think, for the pop. It's going to be interesting to see.

It's interesting that they beat on revenue on the top line. And I'd like to see more about user activity and what that was like. December was obviously the low for crypto. Ethereum and Bitcoin have had great years. The altcoins have not had great years. So it'd be interesting to see just how much user activity came back in Q2 versus Q4 last year. Mike, want to get your thoughts, your reaction to all of these different reports we've gotten so far and what stands out to you? What we did over the last couple of days is take a little bit of the expectations down a notch. So it was a better set up.

Coinbase is like Robin Hood in this category of companies that have, you know, kind of had to get away from the galloping growth stories that they came public on and are much more about kind of managing a smaller opportunity in the here and now. So talking about the third quarter being similar to the second for for Coinbase is is not bad. But I still think that the bigger picture is, you know, pressure on trading fees. And we know about the regulatory side of it. But to me, it's more about exactly how big a market they're going to be addressing here. All right. Mike Santelli, we'll see you in just a bit. Eric Jackson, thank you. George C., thank you. And we'll see you a little later in the show as well. After the break, we're going

to have much more reaction to Amazon's results. Find out what an analyst and a shareholder want to hear from management on the call. Plus, the countdown is on to Apple's numbers now. Those are due out at 4.30 p.m. Eastern. We'll have full team coverage on that report. That's all coming up ahead on Overtime. Well, block earnings are out, too. Kate Rooney has those numbers for us. Hi, Kate.

Hey, Morgan. Looking like a beat for block in the second quarter. Also upping earnings guidance and giving a business update for July. We've got adjusted EPS here at 39 cents. That looks like a beat by about 3 cents. Revenue coming in at 5.5 billion, also better than expected. A comfortable beat here on adjusted EBITDA. That was about $80 million better than what the street was looking for. Cash app gross profit up 37% year over year. Gross payment volume here looks like slightly shy of expectations at $59 billion. Cash app total users came in at 54 million. That was up 15% over last year, from last year. Company also giving that update for July and raising earnings expectation. They're looking for gross profit growth of 21% year-over-year.

Also upping expectations for profitability, raising adjusted EBITDA guidance and adjusted operating income expectations for the full year. I talked briefly to the CFO, Amrita Ahuja. She said the growth was really driven by some of the banking products. And as far as consumer health and consumer spending, she said, we're extremely watchful. We track in real time a lot of these different metrics. She says what we've seen so far in the second quarter and early momentum in July is encouraging. She also talked about consumer credit. She says we have seen fairly consistent repayment and loss ranges that are within our expectations across the board. Stock

is popping a bit here after hours, up more than 4% at this point. Back to you. All right, Kate, thanks. Speaking of stocks popping, Amazon shares higher by about 6.5% after its report crossed moments ago. Earnings and sales both topping estimates. Let's bring in early investor in Amazon, macleway of madrona venture group and jeffrey's analyst brent phil who covers amazon with a buy rating brent uh what's interesting to me here about this move in amazon if it holds into tomorrow's trade it's going to be um at a at a recent high right uh it hasn't been as high as it's trading right now after hours. Contrast that with Microsoft, which is about 9%, I think, off of its recent high. Have people been

underestimating Amazon in your estimation? They have. And I think the operating income really shined when you look at the upside in overall income, Their guidance next quarter, the street was at the low end of their guide on operating income. So we think that is a good sign. AWS was a tad bit better. And I think ultimately Microsoft and Google said optimization trends are continuing. If Amazon says that we're seeing workloads move back to AWS and a restart of that business in the back half, investors are going to continue to get excited. But I think it goes back to stabilization of AWS combined with improved operating income and the stability of the consumer. And Amazon stock does very well when they're in harvest mode. They're harvesting the investments they put in the pandemic. They're

not making as big of investments. And we're in this harvest mode, which should be good for investors. Matt, is this Amazon's chance to break through with bedrock on the call? Talk about its AI initiatives, which, you know, we were talking about it here on overtime, you know, since at least last month when Andy Jassy was on. But people seem to largely have been overlooking it. Well, first of all, I do think this is validation of Andy's strategy and capability as CEO. I mean, he has now been in the seat for two years, and I think there was a lot of question marks after the end of the first year. A lot of the decisions that are showing up in these results are decisions that were made several quarters ago. And so I think it is validation there. I think the bigger picture

piece, though, is that all these big cloud players are going to be winners in an era where we're going to have a next massive wave of innovation. You know, just at the AWS Summit last week in New York, some folks from Wolf Research did some research and they found that 50% of the spend on AI and Gen AI is going to be net new spend. And so you've got this massive tailwind. I think I called it an AI windfall last week. And you're seeing that show up early days in AWS. I think there's a lot more further to prove on the AWS versus Microsoft versus Google.

But they're all going to be winners. It's going to be a matter of degree. Brent, I want to get your thoughts on AWS specifically, the fact that it looks like net sales topped expectations, operating income topped expectations. I mean, we saw strong results in the cloud businesses for Alphabet and Microsoft as well a couple of weeks ago. I mean, is this a situation where we can confidently say there's been stabilization in cloud spending and that this is really a rising tide that lifts all boats right now? It is a tide that's going to lift all three. AWS is the king of the jungle. There's no question they're in great spot. Their sentiment on AI is the worst, though.

So when you look at Microsoft versus Google and Amazon, everyone has been scratching their head in the industry where they're going to go in AI. So the sentiment hasn't been as good. And that's a good thing for the setup on the stock, which is if they can show that they can come back with better PR and wins in AI, there's more room to catch up on the stock. So we like that perspective and where they're at. And I think ultimately what we're hearing through our checks is IT and CIO are actually restarting spend in the back half of this year. We went through an optimization phase of what we bought during the pandemic. And you're hearing this from Google and Microsoft.

But in the expert checks, they're starting to ramp back up as we get ready for AI. We've taken a break from consumption of public cloud. I think we get back on the public cloud highway, if you will. Things refire back up in the back half of the year. And that should be good. Again, the numbers were a little bit better. They weren't phenomenal. They didn't blow it up by any stretch of the imagination. But the stability, many investors were braced for a single-digit AWS number. We got low double-digit, and it feels like the back half of this year will be a lot better for AWS. Yeah, Matt, I mean, everybody's focused on AWS, and then you can also, you know,

make the argument about Prime and the consumer, but what about some of the other businesses that Amazon has continued to grow out and are also seem to be firing on all cylinders, for example, advertising, or even some of the emerging businesses like healthcare. They're making a play into satellites and connectivity and future communications, too. Well, all of these businesses leverage AI. And I think that one of the things, Brett's right, that's misunderstood about Amazon is that they've been leveraging machine learning and artificial intelligence for decades plus, whether it's shopping recommendations, whether it's logistics optimization, whether it's advertising units. And so they've got to get out and tell that story

better. It's one of their clear weaknesses and areas of improvement, I guess I should say. I think they are making some progress, but there's a long way to go. So some of those other businesses are really growing nicely. I think always is the question of where do you make the tough decisions on resource allocation, whether that's within stores, for example. There's a lot of changes happening right now, working from the stores all the way back. And there's also areas like advertising where I think they're doubling and tripling down given their success. So I think the resource allocation that the senior leadership team is

doing is a good job. But coming back to the AI specifically, AWS has to figure out a strategy around applications. They don't really have many co-pilots. And Microsoft's got tons of those. And that's going to be a disadvantage unless they can turn it around. OK, Matt McElwain and Brent Thill, thanks for joining us to talk about Amazon. Shares are up 7 percent right now. We're just moments away from Apple's earnings as well. But before those numbers cross, Mike Santoli will give us a long term look at the stock since the iPhone was first launched. We'll be right back. Welcome back to Overtime. We are minutes away from Apple earnings. Let's bring in senior markets commentator Mike Santoli with one more look at the long-term chart before those numbers hit. Hi, Mike. Hey, Morgan. Yeah, so this is Apple going

back to 2007. That was the year the first iPhone was launched. And it's a logarithmic scale chart, which basically just means it treats all percentage changes the same. It smooths it out as opposed to just doing straight dollar price changes. Had these lines drawn in here for significant interim peaks in the stock over the years. So you see this one. That was a peak sort of shortly after the first iPhone launch. Of course, that's also the global financial crisis. And when it came out of that, it didn't look back. Right. We crossed above that former peak and just did not even threaten it again. That's not always the case, though. And you see this sort of major peak.

We had a couple of years into the mid 2010s and it eventually kind of doubled back to it and sort of tested these levels. So this is a tendency. It's not bankable. It doesn't always happen. But again, you see it happen here, too. Right. Breakout. And then it kind of backed up to it and sort of tested these levels. So this is a tendency. It's not bankable. It doesn't always happen. But again, you see it happen here too, right? Breakout and then it kind of backed up to it and even right here as well. But we haven't seen it this time. We're at the doorstep of about 190, got near 200 on the chart.

But it is worth keeping in mind, even though it seems like it's been this unstoppable perennial winner, it actually has gone long periods of time when it flattens out and digest these massive gains and underperforms the S&P 500 for a period of time. Of course, it's never been as big in the S&P 500 as it is right now. It's well over 7 percent of the weighting of that index. But still, you shouldn't foreclose on the idea that it's not just a one way upside trade. Yeah. And then at least one trader writing this morning about the fact that you have Apple at this kind of key technical moment for the stock,

which is essentially what you're highlighting right now and that it is so important to the broad market. To your point, Apple accounts for nearly 8 percent of the S&P 500 right now. So as goes Apple, so goes the market potentially. So the way I think about it is, yes, mathematically, it has a great influence on the index itself. What it isn't to me is a bellwether of the broader economy necessarily or even the path of the rest of the market. So even though it's going to have an effect on the S&P 500, whichever way it adds the next 10 percent, it doesn't mean that all other stocks will necessarily kind of drive in the same direction, because as we see, it's outperformed just massively over the years. It was not exactly taking all the other stocks with it.

So but can the market continue or maybe even reverse its sort of rut that it's been in for a couple of days if Apple doesn't go higher is what I'd wonder. I would say it probably could. I mean, look, Microsoft is 11 percent or something or got down 10 percent off its high and the overall market kind of hung in. Got to interrupt you. It's 430. Apple's out. Let's get those results from our Steve Kovach. Steve. Hey there, John. Yeah, it's a beat on the top and bottom lines for Apple. Let's go over the numbers here. EPS coming in at $1.26. That's versus the $1.19 expected by the street. Revenues a beat as well. $81.8 billion versus the $81.69 billion expected. That's down about 1% year onyear, by the way, marking the third down quarter in a row for Apple.

iPhone revenues, though, a slight miss here, $39.67 billion versus the $39.91 billion estimated. And services, setting a new record, Apple here. It's a beat on $21.21 billion versus the $20.76 billion expected. That's up 8% year-on-year. So seeing a resurgence in growth there, John, on services. And no guidance, as we've seen from Apple throughout the entire pandemic, but expecting some color on the call as to outlook for the current quarter. And it looks like shares are up fractionally here, about 1%.

All right, John, back over to you. Steve Kovach, thank thank you let's get some instant reaction uh to those earnings numbers joining us now uh scott kessler from third bridge and do we have angelo zeno as well we do angelo zeno from cfra scott first to you interesting the iphone number was a little short uh also uh it looks like the ipad number was a little short. Also, it looks like the iPad number was a bit short of expectations as well. Services made up for that. And the Mac was also a bit stronger. Is this good? I think it's probably a mixed bag, as you were indicating, John, some puts and takes. I think people are going to be encouraged by a couple of things in the revenue number above expectations the services number- was the kind of stand out if you will I think people- have recognized that there are in fact. Some continuing

hardware tear- headwinds if you will but people are really focused on the next I phony announcement- coming perhaps next month. All right. Angela, I want to get your thoughts on this with revenue down 1%, although still third straight quarter of revenue decline, although still representing a beat versus consensus. What's standing out to you in this report? Is it the strength in services or something else? Yeah, listen, I think as far as the results are concerned, I mean, down 1% year over year was kind of what we expected. And, you know, we do expect them to kind of at least apply their guidance towards kind of a return to growth in the September quarter. But, yeah, I mean, to your point, definitely on the services side of things, when you kind of think about the June quarter, it is typically the trough of the iPhone cycle anyway. So it just tends to matter a lot less in our view.

So it's all about the services. The Macs, we did expect to actually be stronger than expected also because of some of the commentary and results we've seen here over the last couple of weeks and the fact that at least on a sequential basis, it looks like the PC market is starting to recover slightly. So yeah, we're not necessarily surprised by how the quarter actually turned out. OK, let's get back to Steve Kovach, who spoke with Apple CEO Tim Cook and has some of those comments for us. Hi, Steve.

Hey there, Morgan. Yeah, I spoke with Apple CEO Tim Cook and talked to him a little bit about that services record that they just posted earlier in the year. They were talking about these headwinds in advertising and gaming. Here's what he told me about those trends kind of reversing, telling me, quote,

advertising has definitely accelerated from before and the app store has definitely accelerated from before. So again, those are two very key components, high margin businesses for Apple there. I also took a chance and talked to him a little bit about AI and the latest thinking at Apple there. Here's what he told me, quote, we've been doing research on AI and machine learning, including generative AI for years, adding later that, and we're going to continue investing and innovating and rolling these things out into products that enrich people's lives. Also told me products like the Vision Pro wouldn't even be possible without artificial intelligence and machine learning that they've developed internally.

And finally, I also spoke to him about that Fitch downgrade that we've been talking about all day here on CNBC. He's not worried about it, telling me, quote, it's not something I'm deeply concerned about. So echoing what we've heard earlier today from Warren Buffett and yesterday from Jamie Dimon Morgan. All right. Steve Kovach, thank you. Scott Kessel, I want to go to you on greater China here. This 15.76 billion dollars in revenue there. I don't know what expectations were, but versus a year ago, that looks pretty strong. And I wonder, does it begin to answer questions about whether the premium end of the consumer market there in China is perhaps faring better than the mainstream end, which we saw hurting Qualcomm yesterday. Yeah, look, that may be the case. I think a lot of people have cautioned that, you know,

drawing observations from Qualcomm's results and extrapolating to Apple. May not necessarily be the most appropriate just given that Qualcomm is not necessarily a major supplier in the context- of the iPhone. That being said however I think that's a positive take away- that the investing public can look at. And focus on going forward I just don't know how much confidence people are going to have. In kind of the continuing strength of the Chinese market and the Chinese consumer at this point. Yeah, I'm going to put the same question to you, Angelo, especially as we saw the America's revenue. It looks like that was up $35.38 billion, so perhaps a slight miss versus consensus.

Also want to get your reaction to some of those comments we got from Tim Cook, if anything jumped out at you. Yeah, no, you know, listen, as far as kind of the China numbers on our end, when you kind of look at the year ago numbers, China actually was weak as well as Japan. So there was actually kind of a fairly low bar for them to have to beat as far as China is concerned. So, you know, likely the high end of the market probably is holding up better than expected on that side of things. But in the same respect, you also have a fairly easy bar to have likely have met out in Asia. But now as far as kind of Tim Cook and some of his comments are concerned, I mean, listen, you know, AI is clearly what every investor kind of wants to hear about

these days. And Apple has kind of been typical Apple in the sense that they've refrained from making any of those comments up until maybe right now. So it'll be interesting to kind of see if Tim Cook throws any additional comments on the call today. But as far as kind of our expectation for AI, it's not like it's something we're expecting from additional, you know, additional revenue perspective over the next nine to 12 months. It's going to be incremental improvements to the ecosystem. Scott, what's the best gauge if there is one in this report, whether Apple's installed base is remaining loyal and margins are holding up? I haven't had a chance to do the gross margin calculation. They never make it easy on a percentage basis when they put these numbers out. But is that perhaps more important in a quarter like this than the units and the

overall revenues because this isn't the big iPhone quarter? Yeah, look, I mean, I think people are going to continue to look at services. It's the second largest business segment for the company. I think the expectations were for services and wearables to amount to around 35 percent of revenues a quarter i think the indications are that services is the best way to understand um how that apple ecosystem um is faring and how healthy it is. The other thing I'd say, just going back to the comments about AI, as Angelo indicated, it is very kind of Apple-like to not really talk about, you know, the big mega trend of the moment,

and then suddenly have something important to say or announce on that front. However, I think people are wondering if that's going to be sooner or later. And I think there are some concerns out there that it might be much later than people are hoping for, as a lot of peers and competitors out there are clearly not only making massive investments, but also product announcements and launches that are having an impact in the marketplace. Yeah. It looks like gross margin is 44.5 percent, according to FactSet here.

That's about in line. Yeah. Services, 70.6 percent margin. So maybe slightly lower than what FactSet had been expecting. Angelo, want to get final thoughts from you here. Just looking at the breakdown, the geographic breakdown, rest of Asia Pacific, it looks like was down 8.5 percent. Greater China, we saw the pop, but Europe, we saw a pop. America is under pressure, I guess, revenue down there. How does India fit into this picture and other emerging markets that we know Tim Cook is very bullish about? Yeah, I mean, as far as India is concerned, you know, to us, it's probably their most important, highest growth potential segment here over the next 10 to 15 years.

We do think India is eventually going to evolve similar to what we've seen here out of China over the last kind of 10 to 15 years. And if that's the case, there is significant upside potential to kind of iPhone expectations here over the next five to 10 years that the street is currently not embedding into their numbers. So I think that's something that, you know, kind of the bulls out there can kind of continue to hang their hat on as far as whether or not kind of the iPhone numbers can continue to run. Not to mention, you know, foldable devices over time in 2024 into 2025, we think is potentially going to be a reality as well that can help push average selling prices up. But as far as the gross margin number real quick, decade real quick, decade highs as far as that's concerned. So overall, definitely better than our expectation. All right. Angelo, Scott, thank you. That gives us some stuff to take into the call in 20 minutes. Much more on Apple's results next when we get reaction from

a shareholder as well. You can find out what he wants to hear on the call, which kicks off again in about 20 minutes. We'll be right back. DraftKings earnings are out. Contessa Brewer has the numbers. Contessa. John, DraftKings delivers a beat on the top and bottom lines. Revenues of $875 million. That's an 88% increase over the same quarter last year, a loss of 17 cents per share against the consensus

expectation of 25 cent loss. And it's adjusted EBITDA. Again, this is the important earnings metric in gaming, showed a result of $73 million, won its positive. True, the street expectation was 18.6 million. So that's a significant beat there. DraftKings also raised its revenue guidance with a midpoint that goes to $3.5 billion for this fiscal year from $3.185 billion. As you can see, the investors like it a lot. Shares up eight and a third percent. Morgan? All right. Contessa Brewer, thanks. We've seen some big moves this hour. Let's get another look at Apple after posting a beat on both the top and bottom lines. Those shares are down fractionally right now, about three to about three quarters of one percent.

George C. from Annandale Capital joins us again for his reaction to those earnings. George, your shareholder here. What jumped out at you? Just that it was kind of ho-hum like I expected, Morgan. They're just kind of going through the motions right now. Amazon was a very pleasant surprise. Booking Holdings is a magnificently run company and reported really, really strongly. Apple's just kind of muddling through right now. And I was struck by the fact this afternoon that it's starting to remind me more and more of PepsiCo, where it's just a classic, wonderful consumer products franchise and is a staple in the universe, so to speak,

of stocks of that sort that you want to own. And that even though the growth rates in both revenues and earnings right now are very muted and very unimpressive, that people are just going to pay 20 to 35, 40 times earnings in that range for this stock for a long time to come. And if you can own it at 28 times, it's probably very safe and very market-ish. And you get a year like last year where it gets drilled, you buy the stock, you buy more of it. I know you mean that as a compliment, but given Steve Jobs' history with John Sculley, do you really want to go there on PepsiCo? That's a great point. Yeah, that is kind of a backhanded insult. And I probably ought to take that back, especially with my regard for Tim Cook. So I take it back.

All right. Well, but let's go back to valuation then, because what, 30 times it's trading at right now. But we did see that revenue decline, 1% decline in revenue, third straight quarter. This is the weakest in terms of top line growth for the company since 2016. How much hinges on this next quarter and this iPhone 15? I really don't think that much, to be honest. I think that the biggest factor right now is what we've been seeing with the shorting of the 30-year that was announced yesterday and with Fitch and with long rates going up. If long rates go up significantly higher, Apple's going to get whacked. I think that's more important for the stock than the fundamentals

right now. But in the long term, I think it's too cheap to write calls on and it's too expensive to buy. So I think you're kind of in no man's land right now. Well, you're also right at that three trillion dollar market cap level. And depending on what happens on the call, that probably is the difference between whether it ends the week above, you know, still above three trillion or below it. Does this level right now, this year even matter so much? Does this iPhone cycle this year matter so much? Or, you know, I'm looking at the gross margins. I'm looking at the services business. Does it really matter whether you get through this period with the loyal customer and, you know, you're still relatively strong when the customer is ready to buy phones in volume again?

I think this year is a great example of how Main Street and Wall Street can disaggregate so strongly. You've had an unbelievable year for the stock this year and for the operating business. It's been a really kind of ho-hum, very sleepwalking kind of exercise. It just is nothing very impressive at all. So I think we're going to enjoy the stock returns right now and wait for better growth in the future, which hopefully we'll get next year because this year has been very mundane. Okay, George, hang tight. Deirdre Bosa is back with us with comments from the CFO of Amazon. Dee? Yeah, I just got off the phone with Amazon CFO Brian Olsalski, and I asked him about

AWS. And I think the big question for Wall Street is whether growth has bottomed out, if that deceleration has happened and it's going to be on the up again. He said the last quarter was a different circumstance. Growth rate had dropped during that quarter. But what he has seen in the last three months is a stabilization of the growth rate. He says there's still cost optimization going on, but a stabilization from Q2 and into the existing quarter right now, the third quarter. So didn't necessarily call a bottom, but a stabilization, which could be good for those investors looking for signs of that. He also mentioned consumer behavior, similar to what he saw at the beginning of the year and that household budgets are still tight and people are trading down. And the last one, he talked a lot about some of the efficiencies

that they've implemented this year, especially in terms of its logistics and regionalization. He said that they're pleased with progress, but sees more opportunity to drive cost efficiency. Back over to you guys. Yeah, that stabilization and AWS in particular, really in focus for the street coming into this print. Deirdre Bosa, thank you. George, you're a shareholder here in Amazon as well. I want to get your action to those comments. And with the stock up 7% right now,

on the heels of those earnings, maybe Apple's in no man's land, but would you be buying this one? No, I wouldn't. I bought it last October, November, and I still am not ready to write call options against the position and cap it on the upside. I think that the street had basically, as was said earlier in the program, handicapping Amazon a lot more than Microsoft and Apple and Nvidia and some of the others. So I think it may have a little more room to run up here right now.

So they were pleasantly surprised. And I think the way the company had been sandbagging results and the way the street had been kind of mediocre on the prospects for it, that we probably got some room to run right now, which is great. But I wouldn't count on a huge run. All right, George C., thanks for joining us. Thank you, Morgan. Double duty today. All right, we got a couple more earnings to hit. Dropbox and Fortinet. Kate Rogers has those numbers. Hi, Kate. Hey, Morgan. Those stocks moving in different directions. We'll start with Dropbox shares up over 4% on its report, beat on the top and bottom lines. Adjusted earnings beat 51 cents versus estimates of 46 cents. Revenue, 623 million, also a beat versus estimates of 614

million. And once again, the stock rallying on that news. And then a mixed quarter for cybersecurity company Fortinet, that stock sinking sinking around 16 in the after hours here 17 now 38 cents adjusted versus estimates of 34 cents that's a beat revenues though a slight miss 1.29 billion versus the estimates of 1.3 billion for the quarter the company also lowered its Q3 revenues guidance to 1.131 to 1.136. Excuse me, rather. Revenue guidance here, 1.31 to 1.37 billion versus the estimates of 1.38 billion previous here. EPS guidance also a range of 35 to 37 cents versus estimates of 36 cents. And the company also having billing guidance below estimates.

And as you can see, that's stocked down around 17.5% right now, guys. Back over to you. Yeah, big move. Kate Rogers, thank you. Up next, we're counting down to the earnings calls of Apple and Amazon, plus some of the other big after hours movers that need to be on your radar. Look at that. Just Amazon in the green right now on your screen. Welcome back to Overtime. Former President Trump leaving court just moments ago after being arraigned on charges related to the 2020 election. Eamon Jabbers has the details. Morgan, that's right.

The former president has left the courthouse. Let's take a live look now at pictures from inside his motorcade, which is moving down 395 outside of D.C., heading toward Northern Virginia and DCA, the airport where he's expected to return to New Jersey in Bedminster, his club there. The former president pled not guilty to all four counts to a four count indictment, including charges related to conspiracy to defraud the United States of America. The former president has been released here under certain conditions. The judge admonished him he's not allowed to try to influence any potential jurors. He's not allowed to talk to any potential witnesses. They say if he violates any of the terms of his release that he could be issued a summons.

They say that he could be issued an arrest warrant and he could be detained if he violates the conditions of his release. So the former president now facing a stark legal reality. This motorcade ride, presumably much different from some of the motorcade rides he enjoyed as president of the United States. We did see an attorney for the former president talking to reporters just outside the courthouse during the course of these proceedings, arguing a lot to the reporters what we expect to see from the president's defense team in court, which is that this was his First Amendment free speech. He did everything legally through the court process and that this indictment they are saying criminalizes typical political behavior. I think that's the line of defense

we can expect to see in the courtroom as well as to reporters outside on the street. Guys, back over to you. All right. Eamon Jabbers, thank you. You bet. Up next, much more on today's after-hours movers, plus what tomorrow's jobs report could mean for the Fed and the market. We'll be right back. Welcome back to another busy overtime session.

Here's a recap of the big earnings movers this hour. Top and bottom line beats for all the names on the screen. Amazon, a big standout with a major beat on earnings per share. Guidance was strong as well. Booking holdings up 12.5%. Coinbase losing its pop just now, just a percent higher now. And we'll get tomorrow the July jobs report following a very strong ADP print yesterday. Mike Santoli back with us. Amazon, right?

Standout here. What do you see? Well, absolutely. Amazon is a standout. And I think it's benefiting from the fact that people didn't have particularly big eyes about what they were going to deliver. So apparently, I think. And you have it or you got to read some more. Mike, take the mic.

Yeah, your mic fell off. You know, you can be forgiven. You've had a busy hour and a busy day. He's all over the place. He makes it look easy. But his mic, you know, that moves around a bit. Morgan, this Coinbase kind of coming off a bit is interesting. I mean, you can never count on just the initial move. That's interesting. I mean, just we've had such an interest. We've had a big read on the fintech landscape in general over these last 24 hours. Coinbase, obviously, there's that SEC and regulatory overhang that's going to persist. It'll be interesting what kind of comments come out on that call. Amazon, Apple, we continue to watch here.

And looking to jobs report tomorrow, we've had some strong labor data this week. That's impacted some of these moves we're seeing in the bond market. You had that explosion in productivity today. Also, one to watch. You can't discount Apple, though. I mean, it's interesting that the iPhone number was a bit of a miss, as was iPad. But you really had services and Mac making up for it. So how that fits into the narrative, really, as you're leading up to the big iPhone release

this fall will be interesting to see and how Tim Cook talks about the geographies. I think that's going to be important as well. Yeah, definitely. That'll be in focus. Also, just the commentary we're going to get on AI. As I was mentioning, we have seen this explosion in productivity. AI is going to contribute to that story over the longer term, too. That's going to do it for us here at Overtime. Fast Money starts now.